All Forum Posts by: Joshua Martin

As for my rookie analysis of the numbers, I'd say the cash on cash return looks pretty miserable. You can achieve better with passive investments in index funds. That's the first red flag. As for your market, I don't know where you are and what ARV or purchasing a foreclosure would cost, but I would say these look like expensive mistakes if they are that. You mentioned a partner? Does he / she have some experience on these sorts of deals? Also, your monthly cash flow should be better after the refi, not before. I don't know what that's about. Also, you might have trouble getting a conventional loan on a foreclosure in that bad of shape. Also, where are the rehab numbers coming from? Way to get out there!

Sounds like your kicking *** and taking action. First of all, don't be hard on yourself. It's a numbers game. If this deal isn't right then move on to the next one. Next, I hear ya. I've been in a dozen houses in the last two weeks and can't believe people lived in half of them, or that land lords could even consider some of the places rent ready, but that goes with the business. I'll look at the numbers and get back to you, but just keep those things in mind. And closing costs vary, but I think saying 5% of ARV is totally inaccurate. It would be the same title work for a 30k or a 300k dollar house.

Sharyn Umaña-Angers Hey Sharyn, welcome to the site and the world of REI! I'm pretty new to this too, doing about the same thing as you except I'm talking to all those people, it doesn't hurt to reach out, and if it's an investor friendly agent and you can communicate that you're serious, I'm sure they'd be happy to put you on automatic notifications from the MLS for properties that look like they'd be good investments. It's really no sweat to them. And if they say no, get used to it, because you'll hear a lot of that too. I also understand the hesitation with the deal analysis. I can run the numbers, but I don't trust them yet -- I don't have the experience to back it up. But analyze properties like you're going to buy them, that makes a big difference. You'll see ones that make sense, see why others are sitting on the market after a year, and see some properties that couldn't possibly cash flow. Just analyze deals to the best you can and you'll get better at it, I know I am. Call for insurance quotes to, make your numbers as solid as possible. And study the market. Zillow is a great tool for rookies. Just watch the recently solds in an area and start getting a feel for property values in your market. And just reach out to people, why the hell not. I figure for me it's good training when people shoot me down, but I've actually been surprised how helpful and friendly everyone I've gotten on the phone with has been. Just take action, you'll feel good about it. Good luck! JTM

I've heard there's a good Madison REIA. When you get there you should start attending those. Just from my own experience, reaching out to people months in advance is not actually that helpful, they have things going on and don't know if you're serious. Good luck! Make it happen! JTM

Listen to the most recent or second most recent podcast about wholesaling. That will give you a ton of ideas, and it's an awesome podcast.

Brice Hall Assuming that you rent for 700 and set aside only 10% a month for CapEx and repairs, @ 70 a month you have 840 a year and 8400 after 10 years, more than enough to pay for a new roof (on a home this size) and flooring. What am I (or you missing)? Granted I haven't replaced a roof yet, I would guess in my market it costs 5-7k for a roof that small and with that light of a pitch. You have a very obvious bias of not allowing anyone's calculations or responses to have any impact on your already made mind. But still I thank you for posting this thread because I got some valuable insights on my Milwaukee market and why this is a very good way to start. Scale up later on.

Way to go dude! That's awesome!

And in response to your question, I don't think so. You need to know expenses to know what the property actually makes. But I'm a goal newb. Again, good luck! JTM

From what I've learned recently (and having a hell of a time doing it), cap rate is one indication. Call a local commercial lender or ask another investor what the cap rate for the area is, and then divide cash flow (NOI-debt service, annual) by purchase price to come up with the cap rate. Depending on area you'll be anywhere from 6-15%. Good areas have lower risk, lower cap rates, but a more stable and reliable return. Poor areas tend to have very high cap rates (why they're appealing to certain investors who are not so risk averse and wise yet ;), but remain questionable whether you'll ever achieve that return with a C-D tenant base. GRM, or gross rent multiplier is another valuation metric, but I can't seem to find it so worthwhile yet. Call a property management group or that same commercial lender and ask what the GRM is for the area. Look up how to run those numbers because I don't remember so well. Last valuation in commercial property is comps. What does a similar property in the area sell for? This one is tough because there may not be anything that similar, unless you're looking at a 6 unit and have another one just down the street that recently sold. As an investor you should also think about cash on cash return. Divide annual cash flow by initial cash investment. With rental property we want high COCRs, otherwise we'd just invest in index funds with a safer and more consistent historical return of 9-10%. In short, I don't know how to say this property is worth X, but I hope that's a start. I googled 'how to evaluate commercial property' a few weeks ago and came up with a good thread explaining all these metrics. I hope that's a start. Good luck! JTM

@Marco Santarelli  Thanks for the tip Marco! What other podcasts do you listen to? I'd be interested in others.